Is Bitcoin a good investment?
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Investing in Bitcoin
Created in 2009, Bitcoin is a relatively new type of asset; however, it has excited many investors seeking to add a non-traditional investment to their portfolios as an alternative to stocks, bonds, and mutual funds. Investors may choose to invest in Bitcoin because they believe it acts as a store of value to hedge against inflation, or that new use cases to make payments with the cryptocurrency will increasingly emerge over time.
Due to its inherent scarcity, Bitcoin is often referred to as “Digital Gold” (there can only ever be 21 million Bitcoins mined). Some investors have traditionally turned to buying gold in hopes that it will retain its value when the dollar loses purchasing power due to inflation because there is a limited amount of gold on the planet. This concept of scarcity is shared by Bitcoin and Gold, alike. Some people investing in Bitcoin to act as a store-of-value believe it to be more useful than gold — Bitcoin is far easier to buy, sell, transfer, or store compared to physical metals.
Many investors believe that Bitcoin's value will increase over time because the demand for using it as a currency to make payments will also increase. If you’ve never used Bitcoin before, it may be difficult to imagine using it to pay for something. However, there are many use cases where cryptocurrency has become the preferred form of payment. Bitcoin has certain advantages when compared to traditional payment methods. When making international payments, such as wire transfers or remittance services, Bitcoin is faster. It does not carry the risk of transactions being accidentally delayed or frozen by intermediaries involved in these other traditional methods. Many aspects of everyday life, work, or pleasure, are increasingly taking place on the Internet. The rise of working remotely and interacting with others across the globe in virtual or augmented reality will demand a currency that is native to the Internet. Many believe this internet-native currency will be bitcoin.
So, is Bitcoin a good investment?
While many of these reasons have attracted investors to buy Bitcoin, there are several things you should keep in mind before considering purchasing any as an investment:
- Bitcoin is not backed by the government of the United States and is not considered legal tender.
- Bitcoin is not insured by the FDIC or any other forms of deposit insurance.
- The market value of a Bitcoin can be extremely volatile, and it experiences large swings in price.
- Bitcoins can be lost forever or stolen by hackers when proper precautions are not followed.
- Look out for scams where fraudsters seek to take advantage of people who are new to investing in Bitcoin (if it seems too good to be true, it probably is; buy from a reputable company).
- Transactions are irreversible — accidentally sending funds to the wrong alphanumeric address could be a costly mistake.
Bitcoin Investing Safety
Bitcoin is a relatively new asset that lives on the Internet. Therefore, you should never invest more than you can afford to lose. Do not purchase a large amount if you are just getting started with Bitcoin. You can get familiar by purchasing small amounts and practice by sending and receiving with friends or family. As you get more comfortable, it is also essential to learn best practices for securing your Bitcoins against loss or theft. Finally, DigitalMint does not provide investment advice, and everything provided herein is for informational purposes only. Speak with a qualified investment advisor before you decide to invest in Bitcoin.
What is Bitcoin?
What is cryptocurrency and how does it work?
Is Bitcoin illegal or legal in the United States?